I believe most of us in class have had Finance or are at least currently taking Finance. Reviewing and analyzing an organization's form 990 was an extensive part of our class. Now, this week it appears we will be looking at 990's again. As an accountant, I might be one of the few people that will enjoy this. Financial figures and reporting can tell a great deal about how an organization is doing fiscally from year to year. At the same time though, there is much more to performance and effectiveness than what the financials say. Yes...this is coming from a numbers guy who you probably bases everything on finances. I get the feeling that our upcoming assignment in assessing a non-profit organization will require us to review form 990's of these organizations. Do I believe it is a helpful tool in explaining how the company is running? Yes I do. But should it be a large contributor in our assessments? Is that really fair?
From my experience, form 990's can be portrayed in many different ways. It's important to review any notes that are accompanied within the form. Large dips from one year to the next could have extenuating circumstances. But I ask again, do these circumstances that drastically change figures from one year to the next make the company effective? We don't know.
If you look here you will see the Binghamton University Foundation's 2008 and 2009 form 990's. Unless you have extensive background in accounting, it's hard to really get a grasp of what the organization does just by looking at this form. For instance, the Foundation's total revenues have dropped from $22M in 2007 to $15M in 2009. Cash on hand however has fluctuated from $1M down to under $300K, then back up to over $2M. What does this all mean? What numbers show that the organization is effective?
I can certainly speak to some of this but I'm curious to see what everyone's thoughs are regarding financial statement reporting.
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ReplyDeleteHi Matt,
ReplyDeleteI am going to be brave and take the plunge. Please correct me if I am wrong about anything!
It looks like the drop in revenue was due to the economic problems at the beginning in 2008, because investment income dropped and contributions dropped dramatically from 2007 to 2008. Investment income was starting to recover in 2009, but donor pockets weren't.
It does look like the Binghamton University Foundation was acknowledging the stingy donor issue because they spent $41k on professional fund raising fees in 2008 (as opposed to nothing in 2007) and spent a whopping $446k in 2009. This spending is a bit disheartening considering contributions were even less in 2009 than they were in 2008 (unless the fundraising spending was near the holidays and people gave money in January 2010? I imagine donors would want to take it off on their 2009 taxes though.) So it will be interesting to see what they spent for fundraising fees in 2010.
The Foundation hasn't been able to raise as much as in 2007, but this seems to be a result of the economy and cannot really be blamed on effectiveness without knowing more.
Assessing cash on hand is useful for seeing if the organization has money on hand to pay their bills (like those fundraising fees!), as opposed to being assets that are tied up in investments and funds. For example, the Tioga County Historical Society has an asset of several thousand, which is great but it's in a trust fund and cannot be used for an electricity bill - it has to be used specifically for African American related programs. So that asset is not really liquid for operational use.
2007
Contributions: $10M
Investment Income: $13M
Professional Fundraising Fees: None (part II, line 30) Am I reading this right Matt?
2008
Contributions: $7M
Investment Income: nearly $3M
Program Revenue: $109k
Professional Fundraising Fees: $41k
2009
Contributions: $4M
Investment Income: $8M
Program Revenue: $124k
Professional Fundraising Fees: $446k
Andrea,
ReplyDeleteExcellent analysis! There was definitely a period of time where donors were not contributing quite as much due to the economy. They still now plea that this is an issue.
Also, you are correct there were no professional fundraising fees until 2008. This became a common practice starting in 2008 and obviously, as you can see increased dramatically in 2009. I am interested to see 2010's line item amount.